Floating LNG import terminal planned for Victoria

Recent media reports about plans for a floating LNG import terminal in Victoria are deeply concerning.

The terminal would allow Victoria, NSW and South Australia to ‘import lower cost gas, potentially from the US or Western Australia’.

This proposal, which the state government says it will consider ‘fast tracking’ would further lock the state into unsustainable reliance on fossil fuels.

Background

Since the Victorian government announced a permanent ban on fracking to access unconventional gas reserves and extended the moratorium on exploration for onshore conventional gas, the gas industry has been relentless in opposing this sensible decision. They have been supported by the conservative media and federal energy minister Josh Frydenberg, who has called on the states to lift gas exploration and fracking bans.

The ban protects farmland, groundwater, communities and the climate, and is widely supported. Yet the gas industry is unwilling to accept the will of the people and continually argues that, without an immediate lifting of the ban, the state will face shortages and ever rising prices.

In reality, the federal government’s obsession with promoting the export of Australian gas has resulted in consumers and industrial users having to compete on the global market to buy gas.

And despite the claims of imminent shortages, The Australian recently reported that commercial and retail gas demand in the nation’s east has slumped a ‘remarkable’ 16% in the past year.

Apart from the frack ban and moratorium, it has made a range of sensible decisions in regards to gas (for instance, stopping funding for the Energy for the Regions program, which extends the rollout of reticulated gas into regional communities).

With the known climate imperatives that require us to stop investing in new fossil fuels, the reality of rising gas prices because of the export market, and the need to transition rapidly to renewables, any support for new gas infrastructure to regional centres represents a new type of stranded asset.

But the reality of price increases and the fear campaign run by the Victorian Coalition and conservative media seems to be impacting on the Andrews government.

LNG plant to become a stranded asset?

A few weeks ago major gas producer AGL said:

"...the energy transition we have all been anticipating will skip 'big baseload gas'' as a major component of the NEM’s (National Electricity Market’s) base-load generation and instead largely be a case of moving from 'big coal' to 'big renewables'. "

Now it’s in active talks to build a floating LNG import terminal in Victoria.

The terminal, which would supply the east-coast gas grid, would allow Victoria, NSW and South Australia to ‘import lower cost gas, potentially from the US or Western Australia’.

How much might this cost? Media reports suggest $200 to $300 million.

And what about the additional environmental costs of shipping gas long distances compared with using locally produced gas?

It also begs the obvious question: is an import terminal needed? University of Melbourne Climate and Energy College research fellow Dylan McConnell said releasing new gas supplies into the Victorian market was unlikely to influence short-term prices for industrial users because new supplies could take a long time to development.

Governments also needed to consider that some consumers were shifting away from gas due to new household technologies that relied on electricity, Mr McConnell said.

Greenhouse gas and stranded assets

Although the approval for this plant occurred while the Coalition was in power, the Andrews government has inherited the climate impacts of this plant.

The conditioning plant represents the completion of the $5.5 billion Kipper Tuna Turrum project in Bass Strait, which has resulted in the development of two new gas fields and the upgrade of a third. The plant will remove excess carbon dioxide and mercury from the gas taken from the offshore gas fields, which will then be processed at Longford.

The current estimate is that around 800,000 tonnes of carbon will be emitted by the plant each year, equivalent pollution to adding about 200,000 cars to Victoria’s roads.

The plant is expected to help facilitate up to 40 years worth of gas supply. With climate change bearing down on us, and rapid technological developments in renewables and storage, it is very difficult to imagine that we will still be requiring bulk volumes of gas in 2057. Luckily, the bulk of the impact of dealing with this stranded asset will lie with people and institutions which have invested in ExxonMobil rather than the public via the state budget.

Carbon capture and storage

And then we have carbon capture and storage (CCS). Long touted as the ‘saviour’ for coal, this technology is intended to separate out carbon from coal or gas, which can then be ‘safely’ and ‘permanently’ stored underground.

Despite absorbing more than $1 billion of taxpayer funds, no one can realistically say when, or if, this technology might be commercially viable at a commercial scale.

Further investment in CCS potentially becomes another waste of public funds that will affect the state’s economic bottom line without adding new economic activity.

It appears that there is still at least $20 million in funding that has been promised but not yet allocated for the Victorian CCS project. Friends of the Earth calls on the state government to release these funds and allocate them to renewable energy or job creation programs in the Latrobe Valley.

Taken collectively, this massive public and private investment in new carbon intensive industry is very unlikely to reduce the cost of energy (gas in particular), and certainly not help in any short or medium term timeline. Further investment in any sort of fossil fuel infrastructure just locks consumers into higher prices and helps put off the day we make the full transition to 100% renewables.

Short term measure - a cap on exports

Friends of the Earth understands that the rise in gas price is impacting on domestic and commercial users.

So as a short term measure we support the intention of the Victorian government to place a cap on the total allowable gas that major companies can export in order to protect domestic needs.

"To drive down prices, support local businesses and protect jobs now, the Labor Government is calling for a tough, temporary cap on the amount of gas that can be exported to first protect the needs of local homes and businesses.

The Labor Government proposal would also provide temporary subsidies and co-investment for energy efficiency measures and give the Australian Competition and Consumer Commission greater powers and market oversight".

Victorian communities from across the state support a transition to clean renewable energy and see this area as a huge opportunity for regional communities. Supporting a LNG floating terminal would undermine the shift from fossil fuels to renewables and further lock in Victoria’s reliance on gas. A swift and adequately funded community and government driven transition will protect jobs in agriculture and tourism and create new jobs in the electricity sector, while safe guarding our states' clean green image, our vital water supplies and our health.